We have previously reported that inhibition of human CFU-erythroid (E) colony formation by tumor necrosis factor (TNF) is an indirect effect mediated by a soluble factor released from a fraction of marrow accessory cells which are predominantly stromal elements (Means, R. T., Jr., E. N. Dessypris, and S. B. Krantz. 1990. J. Clin. Invest. 86:538-541). Further studies reported here identify a mediator of this effect. The inhibitory effect of recombinant TNF on marrow CFU-E is ablated by neutralizing antibodies to human beta IFN, but not by antibodies to gamma IFN or IL-1. Anti-beta IFN also neutralizes the inhibitory effect of conditioned medium prepared from marrow cells exposed to TNF. Human beta IFN inhibits colony formation by unpurified marrow CFU-E as well as highly purified CFU-E generated from peripheral blood progenitors, and limiting dilution analysis shows that this is a direct inhibitory effect. TNF has been implicated in the pathogenesis of the anemia of chronic diseases since blood TNF levels are elevated in many patients with this syndrome, and since exposure to TNF produces a similar anemia in either humans or mice. The present study demonstrates that beta IFN is a required mediator of this inhibitory effect on erythropoiesis.